SAN DIEGO —— California remains on target to issue its first
grants from its novel $3 billion stem cell research institute by
May, according to its chairman, although biotechnology companies
and other industry applicants might be frozen out of the initial
grant-making process.

Bob Klein, chairman of the committee tasked with overseeing the
California Institute for Regenerative Medicine, pledged Thursday to
issue grants by May at the end of an eight-hour meeting of the
Independent Citizens' Oversight Committee. The committee met at the
Neurosciences Institute in the Torrey Pines Mesa area of La
Jolla.

The 29-member committee was scheduled to discuss restricting the
first rounds of grants to nonprofit labs and universities because
of patent and profit issues but delayed extensive conversation on
the matter until its meeting next month.

Earlier this week, an influential institute subcommittee floated
the nonprofits-only plan and it appears to have widespread support
of the full committee. Committee vice chair Ed Penhoet said at the
subcommittee meeting Monday that it would be relatively simple to
create a single, boilerplate intellectual property agreement
between the institute and nonprofit grant recipients spelling out
who owned the rights to any drugs or other commercial products
created with taxpayer money.

Committee members also decided Thursday to temporarily house the
stem cell research institue in Emeryville. The announcement appears
to give at least a psychological setback to efforts by San Diego
biotechnology and business leaders to locate the institute
here.

The California Institute for Regenerative Medicine will be
located in the East San Francisco Bay Area city for up to one year,
under a lease that gives it seven months free rent and a 30-day
cancellation option.

Biotech industry leaders throughout the state, especially in San
Diego, have been lobbying to host the institute, which will
disburse about $3 billion over 10 years to fund research into using
stem cells to cure diseases. Local officials think having the
institute located here will give San Diego biotech a prestige
boost, as well as providing easier access to the
decision-makers.

However, the San Francisco Bay Area, which has more biotech
companies than San Diego County, is generally believed to be the
front-runner to host the institute on a permanent basis. But
hosting the interim location doesn't give any advantage, said Fiona
Hutton, an institute spokeswoman.

"Seeing how the interim headquarters is near the hometowns of 85
percent of the staff members they introduced today means we've got
a real competition on our hands," said Andrea Moser, a spokeswoman
for the San Diego Regional Economic Development Corp. "We've got to
put together a proposal that will cause people to have to really
think hard. … We've got to really give them a run for their
money."

A much thornier issue, Penhoet said, was hammering out similar
agreements with companies applying for grants. Complicating the
matter is the fact the University of Wisconsin, where human
embryonic stem cells were first discovered, and its corporate
partner Geron Corp. of Menlo Park claim broad commercial rights to
any stem cell-based products.

Ensuring that California taxpayers recoup their $3 billion bond
investment, which is expected to balloon to $6 billion once
interest is added, has become a political hot potato for the
nascent agency. Putting off making grants to corporate interests is
seen as a way to put off the controversial issue until the agency
has better intellectual property standards in place.

Still, Klein and the board dealt with other controversial issues
Thursday, including how Klein intends to collect the $1 million he
loaned the campaign that backed Proposition 71, which created the
institute he now heads.

An Oakland public interest group said Thursday that it was
concerned Klein and the campaign organization he led might cross
conflict-of-interest guidelines in their efforts to pay back the
debt to Klein.

"This raises the prospect of the head of a powerful state agency
asking for money to reimburse his own campaign expenses from people
who may desire grants from that agency," said Jesse Reynolds of the
Center for Genetics and Society.

Klein said he and the campaign organization had no intentions of
actively soliciting potential donors and he called the loan a
"long-term obligation." Klein also contributed an additional $2
million to a campaign that spent nearly $35 million. Proposition 71
passed with 59 percent of the vote in November.

Stem cells are the "ancestral" cells that turn into the various
kinds of different cells in an adult body. California voters
allocated the money when they approved Proposition 71 in the
November election. The initiative gives priority to funding
research with embryonic stem cells, which are taken from days-old
embryos. President Bush has forbidden nearly all funding for
embryonic stem cell research, citing moral concerns about killing
human embryos for the cells.

Before the meeting, the institute held a press conference
focusing on an always fatal disease that may potentially benefit
from stem cell therapy, amyotrophic lateral sclerosis, ALS, or Lou
Gehrig's disease. ALS gradually destroys brain and spinal nerve
cells controlling movement and breathing.

Robert Carter, an ALS patient living in Carmel Valley,
emotionally described from a wheelchair the effect the disease has
had on him and other members of his family who also have ALS.